TCS Q2 Overview: TCS Q2 Overview: Expect 3-5% QoQ revenue growth; pay attention to the agreements concluded, request from India
Analysts predict that sequential net income growth will be in a range of 4-11%, while on an annual basis that range could be 10-12%.
“TCS’s primary focus during FY22 has been to gain market share (similar to Accenture), and we believe it will continue to be the primary beneficiary of supplier consolidation. We forecast 4% QoQ revenue growth in constant currency (CC) terms with widespread growth across all verticals. The recovery in India and other emerging markets, which slowed in the first quarter of fiscal 22, will be a key area to watch, ”BOB Capital analysts said.
The past quarter has been marked by big victories. The total contract value (TCV) in the first quarter was $ 8.1 billion and a similar number is expected for the September quarter.
Some of the main contracts won by the company during the quarter included:
- Transport for London: 10-year contract with the possibility of a 5-year extension
- Avianca: To modernize IT infrastructure and migrate 129 core applications to the cloud
- NXP semiconductor: Drive NXP’s integrated IT services strategy across all applications
- Bank of the North: 5-year IT transformation agreement with German bank NORD / LB
- Israeli Bank: Israel’s First All-Digital Bank Uses TCS BaNCS
- MCX: As part of the Udaan project, TCS will transform its negotiation and post-negotiation functions.
“We expect robust growth of 5.5% in terms of CC and a growth of 4.7% in dollar revenue per quarter, driven by a strong increase in the backlog in previous quarters, a rebound in activities in India after a sharp decline in the first quarter of fiscal year22, market share gains and aggressive customer spending on smaller digital transactions, ”Prabhudas Lilladher analysts said.
“We expect margins to increase slightly by 50 basis points in QoQ, as headwinds from higher wages, higher retention and higher recruiting costs to fill attrition will be offset by the effect. leveraging revenue growth and optimizing the pyramid, ”they said.
The company implemented a salary increase in the 1st quarter of fiscal 22 from April 1, 2021.
Main controllable items in the second quarter results:
- Trend in demand in all sectors
- Timetable for accelerating major transactions
- Pricing update
- Large contract pipeline and reasons for the lack of mega-deals
- Supply side issues, hiring trends, salary increases its impact on future margins
- Business recovery in India